The dramatic spike in interest rates, foreign exchange impairments and capital gains tax saw the Nairobi Securities Exchange report a drop in its profits last year from $3.2 million to $3.05 million.
NSE said that these factors contributed to the three per cent decrease in equity turnover from $4.16 billion in 2014 to $4.09 billion last year, as the total income fell by 1.7 per cent to $7.82 million, from $7.95 million.
NSE chief executive Geoffrey Odundo said that the drop was due to a decline in turnover in the equity and bonds markets.
The trading turnover was also negatively affected by the reintroduction of the capital gains tax at the start of the year, which greatly impacted on the bond and equity markets. The tax was eventually scrapped by the National Treasury during the financial year presentation in June last year.
It saw a decline in the secondary trading activity in the fixed income market by 39.7 per cent to $5.9 billion, from $9.7 billion the previous year.
NSE said its operating expenses rose by 15.1 per cent from $3.76 million to $4.33 million, attributable to additional costs as the exchange launched new products and reorganised its internal structures. Overall, its profit before tax dropped by 13.6 per cent to $3.69 million compared with $4.27 million the previous year.
The self-listing bourse also saw its total assets rise by 13.8 per cent to $19.15 million last year, up from $16.3 million the previous year, which it attributed to increased profitability.
During the year, NSE said that it invested seed capital of $20,000 towards the NSE Clear Ltd (a clearing house for derivatives), $1 million towards the NSE Derivatives Settlement Guarantee Fund and $10,000 towards the NSE Derivatives Investor Protection Fund.
On its outlook, Mr Odundo said that they are on course to launch the derivatives market this year, which will provide Kenyans with financial instruments that will enable them to hedge against currency and investment risks.
“We are also expecting this market to create a new investment opportunity for both the local and international investors. We also expect to upgrade the Automated Trading System (ATS) to allow it to offer more availability to its trading members and better support its new product and service offerings,” said Mr Odundo.
NSE also said that it will be launching the exchange traded funds (ETFs), marketable securities that track an index, a commodity or a basket of assets.